[chinny98]

OK sir, then what is the reason behind we use debt finance over equity finance in pecking order theory???

except talking about it is easily obtained as compared to equity

Thanks you very much

[chinny98]

How about the following reasons. Is it applied to pecking order theory?

using debt financing signals that the company is confidence that the company can meet its obligation, while using equity financing gives negative signals that negative signal that the stock is overvalued and their share price might be about to drop.

Thanks

[chinny98]

Ya I do understand that both debt ratio & debt to equity ratio are used to measure gearing.

I am just wondering the interpretation of debt ratio. for example, a debt ratio of 30% is tht means 30% of the assets are financed by debt, while the 70% of the asset is financed by equity? <<< is it interpret in this way?

Thankss

[chinny98]

okk sorry sir, typing error should be 125 liters and not 120 liters.

Thanks sir I gt it.

[chinny98]

under the ifrs16 new standard, does we still separate the lease into two different name (finance lease and operating lease) OR we just use one name called finance lease since the accounting treatment is the same?

[chinny98]

as to what I saw from bpp books, deferred income can choose to be included or excluded in calculation of gearing ratio? is that true?

[chinny98]

so if I assume that the spot rate is equals to future rate at the date of transaction, meaning that use (1.25-1.24) x (1m/1.25)=8000 pounds to get future profits. also, leave the transaction at risk using spot rate (1m/1.25)=800,000 pounds. in total, i get 808,000

why I cannot get back the same answer by using (1m/1.24)=806,452?

Which part I do it wrongly?
can help me to rectify ?
thankss

[chinny98]

so the government grants will be fall in which category of financing??? how about equity financing?

[chinny98]

How about the following question? because as to what I saw in the BPP answer, the answer uses new operating profit/new investment to calculate only???

BPP revision kit
12 An investment centre in a manufacturing group produced the following results in the previous financial year:
£’000
Operating profit 360
Capital employed: non-current assets 1,500
current assets 100
For the purpose of performance measurement, non-current assets are valued at cost. The investment centre is considering a new investment that will increase annual operating profit by £25,000, and will require an
investment of £100,000 in a non-current asset and an additional £30,000 in working capital.
Will the performance measurement criteria of (1) Return on Investment (ROI) and (2) residual income (RI) motivate the centre manager to undertake the investment?
Assume notional capital charge of 18% on divisional capital.

[chinny98]

is tht means basically practical considerations refers to factors (i.e before I use venture capital and private equity -like whether my company gt the ability to use this source of finance or not) , while practical implications refers to advantage and disadvantage (after I use venture capital and private equity will be how like is it good or bad to my company) ?
Thanks

[chinny98]

Sir, Further one more question about LF with make or buy, profit earned from PRODUCTION PLAN <<< is that means should only include the profit earned from the units produced by the company itself?? because the word production plan sounds like only related to products made by itself and exclude the products buy from sub-contractor??

[chinny98]

Orhh sorry I misunderstand it. I have watched the free lecture video

As per u mention, average investment= initial investment + scrap value/2

However, I am wondering the example 8 sir u discussed in lecture video why from 80,000 (asset original amount) drop to 10,000 (scrap value). The difference not supposed like 80,000 drop to 10,000 which means difference is 70,000 and then divided by 2? why it will use 80,000+10,000/2 to find the average investment??
I a bit confused with this part.

If there is disposal cost, where will it be?

[chinny98]

I think scrap value is the net realisable value, while disposal value is the cost to remove the asset.
It should not be the same thing right?????

Thanksss

[chinny98]

Is it same like scrap value, but disposal value is + to initial investment while scrap value is minus from initial investment?

Average annual profit=

Total est CF- total depreciation for the investment (initial investment-scrap value+disposal value)=total profit
From total profit/investment life span= average annual profit

Average investment
=(Initial Investment-Scrap Value +Disposal Value)/2

Is that correct?

[chinny98]

Is that means the planning and control cycle is considered as the budgeting process? (as to page 220 BPP Textbook 2016/2017)
(first we need identify objectives, followed by identify potential strategies, evaluate strategies, identify possible course of action)

In summary,

Budgeting system is we use what method to prepared the budget.

Budgeting process is how we are going to apply the method of budgeting (zero-based, incremental) into practical.

The above is what I understand from sir your explaination above.
Is it correct?

[chinny98]

I gt watched your free lectures and study the lectures note.

The answer provided is the annual fixed maintenance fees and other fixed annual operating costs are not included in the calculation of NPV so I feel weird about it.

I also found out that the payback period are not within the system life span.

Is that possible to have this kind of scenario?

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